London, England — MININGREVIEW.COM — 07 February 2010 – Iron ore explorer African Minerals Limited has signed a deal with China Railway Materials Commercial Corporation CRM to buy a 12.5% stake in the company for US$244.1 million (R1.8 billion) to develop its flagship project in Sierra Leone.
African Minerals said in a statement released here that this would fund the first stage of its Tonkolili project. The two companies expect to complete a final agreement on about March 31, it added.
In terms of the agreement, China Railway, subject to due diligence, will buy 5-8 million metric tonnes of “hematite” iron ore a year from Tonkolili for at least 20 years from 2011, and 10 million tonnes of “magnetite” ore from 2013. They also agreed on options to extend supply by five years.
“African Minerals welcomes the signing of this conditional agreement with CRM, one of China’s large-scale, state-owned enterprises and one of its largest steel trading companies,” said chief executive Alan Watling.
“The agreement should provide us with a strong foundation from which to secure funds for our second phase of iron ore production, targeting 45 million tonnes per annum,” he added.
China, the biggest buyer of iron ore, has invested billions of dollars in projects globally to try to reduce dependence on Vale SA, Rio Tinto Group and BHP Billiton Limited “’ the world’s three largest suppliers.
The company’s flagship Tonkolili in Sierra Leone contains 5.1 billion tonnes of iron ore and the company claims that the northern section of the licence area indicates the potential to increase the resource to about 10 billion tonnes.
African Minerals expects Tonkolili, which needs a long railway line to ship the ore, to become the largest iron ore producer in Africa and one of the lowest cost producers.